The country's economic woes continue

The loss brings to an end the worst month for stocks in China since August of 2009, when China was still reeling from a global financial panic and recession that caused massive losses in financial markets around the world.

For the month of July, the Shanghai Composite Index fell a total of 15%, despite unprecedented state intervention aimed at calming markets. According to Bloomberg, the losses on Friday started “after Reuters reported that Chinese regulators had asked financial institutions in Singapore and Hong Kong for stock-trading records as part of efforts to track down investors betting against shares in China.”

Chinese regulators also halted trading in 505 companies on the Shanghai and Shenzhen exchanges on Friday, equivalent to 18% of all listings.

But while both Silicon Valley giants create networks that allow you to engage with friends and celebrities, the two have less in common than you might think. That was plainly evident in both companies’ recent earnings reports.

While Facebook — which is now worth more than 10 times as much as Twitter — is still considered a story of rapid growth, Twitter is quickly losing its luster on Wall Street as it struggles to match its rival when it comes to user growth and ad revenue.

Here’s what their financial results revealed:

The Ad Gap

Facebook announced it had taken in about $3.8 billion in advertising revenue in the second quarter, up from $2.7 billion a year before — a 41% jump. And advertisers are lining up across the globe to reach Facebook users, as international ad revenue climbed to $2 billion.

Yet there are still many more ways Facebook can leverage it’s popularity into future growth. For instance, Facebook’s popular photo-sharing app Instagram, with about 300 million users, and its instant communication tools Messenger (700 million users) and WhatsApp (800 million) have the potential to add meaningfully to revenue in the future.

Twitter reported some good news on the sales front too. The microblogging site surprised analysts this week with stronger-than-expected revenue growth, as ad sales jumped to $452 million from $277 million over the same period 12 months ago. This was certainly welcome news for investors who had endured a 25% drop in the company’s stock price in the first three months of this year amid disappointing revenue growth.

Still, Facebook generates twice as much sales in a quarter than Twitter does annually.

The User Gap

Facebook just has a staggering number of active monthly users. To put it in perspective, there are about 7.3 billion people in the world and about 1.5 billion of them — 21% — are on Facebook. There are roughly 213 million active users of Facebook in the U.S. and Canada out of more than 355 million people. American and Canadian users are particularly beneficial to Facebook’s bottom line, which takes in $8.63 in advertising revenue per user there compared to $2.61 worldwide.

This growth in popularity is crystallized when you look at mobile phone carriers. Those who only access Facebook through their handheld device jumped from 399 million a year ago, to 655 million now. Overall, 1.3 billion people access Facebook in the palm of their hands.

While Twitter impressed the street with its revenue numbers, the stock dropped double digits thanks to the company’s inability to significantly grow its user base. Chief financial officer Anthony Noto said in a conference call after the earnings release that it would be “a considerable time” before such growth occurred.

Twitter has 66 million monthly active users in the U.S., up from 60 million a year ago, and 250 million internationally. In other words, it is more than 1 billion users shy of playing in Facebook’s league.

The Valuation Gap

While Twitter theoretically has more room to grow than Facebook, investors have to pay a stiff premium when betting on Twitter’s future. The stock’s price/earnings ratio, based on projected profits, is 64, according to Morningstar. That makes Twitter shares considerably more expensive than Facebook’s, with a P/E of 37.

To add insult to injury, Twitter announced that it was cutting the range of what it expected to spend on capital investments this year from $500 million to $650 million to $450 million to $550 million. Facebook meanwhile spent $549 million in capital investment in the second quarter alone.

401(k) balances for longtime savers soared to $250,000, but many are taking big risks in the stock market.

IRA and 401(k) balances are holding steady near record levels. But certain risks have been creeping into the typical plan portfolio, which after a long bull market may be overexposed to stocks and otherwise burdened by a rising loan balance, new research shows.

The average balance in both IRA and 401(k) accounts dipped slightly in the second quarter, but continues to hover above $91,000 for the past year, according to new data from Fidelity Investments. Savers who have participated in a 401(k) for at least 10 years, and those who have both an IRA and a 401(k), now have balances that top $250,000.

Much of this growth owes to the stock market, which has more than doubled since the recession. But individual savers are stepping up as well. For the first time, the average 401(k) participant socked away more than $10,000 (including company match) in a 12-month period, Fidelity found. That occurred in the second quarter, when the total contribution rose to $10,180, up from $9,840 the previous quarter.

Yet bulging savings have tempted some workers to dig a little deeper into the 401(k) piggy bank. New plan loans and participants with a loan outstanding held constant in the second quarter, at 10.1% and 21.9% respectively. But the average outstanding plan loan balance climbed to $9,720, compared to $9,500 a year earlier. This leaves borrowers at greater risk of losing tax-advantaged savings and growth.

Plan loans are a primary source of retirement account leakage—money that “leaks” out of savings and never gets replaced. This may occur when a worker switches jobs and cannot repay the loan, which becomes an early distribution and may be subject to taxes and penalties.

Meanwhile, savers who are not invested in a target-date fund or managed account, and who have not rebalanced to maintain their target allocation, may find that the brisk rise in stock prices has left them with too much exposure to stocks. Baby boomers especially are at risk, Fidelity found. Pre-retirees should be lightening up on stocks, while adding bonds to reduce risk. But unless they regularly rebalance—and few people do—boomers have been riding the recent market gains, so they are holding an ever larger allocation in stocks than they originally intended.

That inertia could hurt boomers just as they move into retirement. During the last recession, 27% of those ages 56 to 65 had 90% or more of their 401(k) assets in stocks, which fell some 50% from the market peak in 2007. Those kinds of losses could wreck a retirement.

Could this scenario repeat? Very possibly. Nearly one in five of those ages 50-54 had a stock allocation at least 10 percentage points or higher than recommended, Fidelity found. For those ages 55-59, some 27% of savers exceed the recommended equity allocation. One in 10 in both age groups are 100% invested in stocks in their 401(k). It’s possible that these investors are holding a significant stake in safe assets, such as bonds or cash, outside their plans, which would cushion their risk. But that often is not the case.

Whether you’re approaching retirement, or you’re just starting out, it’s crucial to hold the right allocation in your 401(k) plan. Younger investors, who have decades of investing ahead, can ride out market downturn, so a 80% or higher allocation to stocks may be fine. But a 60-year-old would do better to keep only 50% invested equities, with the rest in a mix of bonds, real estate, cash and other alternatives. To get a suggested portfolio mix, try this asset allocation tool. And for tips on how to change your portfolio as you age, click here.

Persistence is the key to any successful endeavor.

Building wealth is a process, not an event — a process that takes discipline and a long-term outlook. You must focus on yourself, not what others are doing. Work hard and maintain a consistent approach. This may not be easy, but it’s doable for most people if they choose to make a commitment and stick to it.

In the end, though, the “stick to it” part is what usually trips people up.

In an excellent post on his blog Seeking Wisdom, Jana Vembunarayanan gives a fantastic summary of how to succeed at just about anything. Here are his observations and recommendations, to which I’ve added some suggestions for applying them to your finances.

1. Recognize that it takes a long time to create anything valuable. Investing works over long periods of time. The market has never lost money over any 20-year stretch. The problem for many people is that they don’t understand their time frame. They confuse short- and long-term money and end up bailing at the worst possible moment. Finding a strategy that works, and sticking with it for decades despite the inevitable booms and busts of the markets, is not exciting. While you might feel you are missing out on the latest big thing, you will most likely have the last laugh.

2. Work hard every day even if you don’t see improvement in the short term. Building your skills enables you to earn a higher income, so you can save more. Small increases in savings each year are barely observable at first, but over time you can be working toward saving 20% of a $100,000 salary, which will provide great rewards in the future. Many will give up because they become impatient with a seeming lack of progress. Accept the short-term stagnation knowing you will be rewarded with the miracle of compounded returns in the future.

3. Keep doing it consistently for a very long time without giving up. Persistence is the key to any successful endeavor. While it might satisfy a short-term urge to remodel your kitchen by raiding your 401(k) account, resist this temptation and stick to the plan. Investing is simple but not easy. Track your wealth accumulation yearly, not daily. This encourages you to build your future, not mortgage it.

4. Enjoy the process, and don’t worry about the outcome. Put things on autopilot. Set your plan to save a certain percentage of your salary, with an increase of a percentage point or two each year until you maximize your contributions. Find a few diversified, low-cost index funds, add an automatic yearly rebalance, and forget about it. Enjoy your life and ignore the daily end-of-the-world events that saturate the financial media in their quest for advertising dollars. Focus on the fact that you will be financially secure by sticking to your plan. In your free time, devote your energies to finding things you like to do. Find ways to increase your skill level and eventually make money from a “job” that doesn’t seem like work. This way to supplement your income might lead you down some surprising paths while you have the security of your savings plan at your day job.

5. Don’t compare yourself to others; instead, compare yourself now to yourself two years ago. Keeping up with Joneses is, as serial insulter Donald Trump would say, a loser’s strategy. A phenomenon called “lifestyle creep” can sabotage the best-laid plans. It means that the more you make, the more you spend. Your only accomplishment is making the hamster wheel spin faster. Don’t worry about what others have. No matter how rich you are, there will always be someone who has more than you. And such people might just be renters anyway, buying their goodies with credit cards with huge balances. Look at yourself instead. Build a disciplined savings plan, and follow it with no deviations. Competing with your neighbors over who has the most “stuff” is not a good use of your time.

As Warren Buffett once said, “Games are won by players who focus on the playing field, not by those whose eyes are glued to the scoreboard.” Keep these five points in mind, and your probability of success will increase immensely. Good habits will eventually lead to superior results in whatever you do. The key is to figure out what works for you and stick to it. Your process will determine your future. Spend time developing it, and then enjoy your life.

Q: I need to rebalance my portfolio. Is it best to adjust my investments all at once or a certain amount daily, weekly, or monthly? — Cheryl, Corona, Calif.

A: Rebalancing, which refers to periodically resetting your mix of stocks, bonds, and other assets to your desired levels, is key to successful investing over the long run.

Not only does it force you to lighten up on the parts of your portfolio that have seen the biggest gains recently — and therefore tend to have more risk — it forces you to stay true to your plan (i.e. asset allocation).

But as with most things, there can be too much of a good thing. Most investors should plan to rebalance their portfolios about once a year and, in most cases, no more than twice annually.

Why?

“Rebalancing means you have a transaction, and a transaction inherently involves costs,” says Bob Phillips, a chartered financial analyst and managing principal at Spectrum Management Group in Indianapolis, Ind. If you are rebalancing in a taxable account, there are transaction-related expenses, such as trading commissions or mutual fund loads.

There are also tax-related expenses to account for, which can be a real drag on returns. If you rebalanced daily, weekly or even monthly, says Phillips, “the tax recording would be ungodly and the cost of having your tax return prepared with all those transactions might be more than what you gained from rebalancing.”

In fact, in a study published by the CFA Institute, the researchers found that for most investors the best strategy was to do it all at once, generally once a year and only if your asset allocation is more than 5% out of whack.

“So if your target allocation is 60% stocks and 40% bonds, you would not rebalance if your stocks grew to 63% of the portfolio and bonds fell to 37%,” says Phillips, noting that the researchers ran thousands of scenarios to come to this conclusion. (In this case, you would only want to rebalance after your equity allocation drifted to more than 65% or less than 55%.)

In the case of a 401(k) plan or other retirement account, you can afford to rebalance more frequently. But even then, it’s best to do so in moderation.

After all, if you were rebalancing daily in a rising market, you’d be constantly selling investments before they’ve had much room to run.

One way to keep things in balance in your 401(k) without incurring transaction fees and tax headaches is to simply tweak how you invest your new contributions (assuming you are still contributing).

For instance, say you want a 60% stock/40% bond allocation, but by year end you notice that it has drifted to 65% equities. Here, you would leave your already accumulated assets alone. But you would put most of your new 401(k) contributions into bonds until your accumulated balance shifts closer to that desired 60/40 mix.

If you were looking for guidance with your retirement planning, would you be more likely to hire someone if his business card stated he was an Accredited Retiree Counselor? How about if he were a Qualified Retirement Strategies Specialist? Or a Certified Retirement Planning Expert?

I hope not, because I just made them up by writing dozens of words like “retirement,” “accredited,” “specialist,” etc. onto little slips of paper, tossing them into a bowl and then drawing them out at random. Which illustrates a fundamental quandry: Given the dozens of official-sounding designations out there, how can you tell whether a string of impressive titles represents real retirement-planning know-how or is a marketing gimmick designed to imply expertise that isn’t there? I have three suggestions.

1. Demand details about the designation. Don’t be shy. Just say you’re naturally skeptical of such titles in light of the recent National Senior Investor Initiative report from the SEC and FINRA and an earlier study from the Consumer Financial Protection Bureau that raised questions about senior designations. Among the questions you should ask: What organization issues the credential? What makes that organization credible (Is it accredited? If so, by whom?) How long did it take to get the designation and what was required (how many hours of study, on-site or online course work, a final exam)? Is continuing education required to maintain it? Basically, you want to know that the adviser isn’t effectively trying to buy credibility.

You can get more information about professional titles and designations by going to the Paladin Registry’s Check A Credential tool and FINRA’s Professional Designations database.

2. Vet the adviser. I don’t care how extensive an array of designations an adviser holds, you still have to do some due diligence to make sure the adviser hasn’t had a litany of complaints clients and/or run ins with regulators. A good place to start your digging into the adviser’s background is the Check Out A Broker or Adviser section of the Securities and Exchange Commission site, which has detailed information on how to research the background of all types of advisers—brokers, financial planners, investment advisers—plus other resources, including links to FINRA’s BrokerCheck system and state securities regulators’ sites.

3. Listen to your gut. Although there’s always the risk of being duped by a Madoff-like investor who’s a complete fraud, the more likely scenario is that you end up doing business with an adviser who’s willing to boost his bottom line at the expense of yours. To lower the odds of that happening, spend some time with the adviser to find out exactly what he intends to do for you and what his products and services will cost.

Start by getting a sense of how he operates: Does he make his living mostly by selling a limited range of products from a restricted menu offered by his own or affiliated companies? Or can he pick and choose investment options from a broad range of firms? You also want to find out exactly how is he compensated—solely by commissions, by annual or hourly fees, a combination of fees and commissions? Each method has its advantages and drawbacks (although I think paying fees for advice has less potential for conflicts of interest). But whatever system the adviser uses, he should be able to provide you a written estimate of his fees and any other charges upfront.

Ultimately, you want to deal with an adviser you feel you can rely on to deliver independent advice, not someone looking to charge bloated annual fees to manage your money or a salesperson looking to unload his inventory on you. So if at any point in the process of dealing with an adviser you feel that something doesn’t ring true or that you’re not really sure you can trust the adviser, my advice would be to move on. There are plenty of advisers out there to choose from.

Who knows, maybe efforts now underway by the White House, Department of Labor and Securities and Exchange Commission to hold advisers to a more rigorous standard may make it easier for consumers to find advisers they can trust. I don’t consider that a given, but we’ll see. In the meantime, though, don’t let an alphabet-soup of credentials on a business card determine which adviser gets to handle something as crucial and irreplaceable as your retirement savings.

How to Make Money Like a Millionaire

It's easier than you may think.

A seven-figure nest egg may feel far off, but these millionaires—and millionaires in the making—have figured out the keys to financial success. From smart investing to aggressive saving to launching a business, check out their tips for reaching your million-dollar payday. (And then read the rest of our advice for How to Reach $1 Million.)

Scott Jones

Debra Cohen, 48, Long Island, N.Y.Her Approach: “I feel very strongly that if you have some drive and want to make a million dollars, you should be in business for yourself,” says Debra Cohen, president of Home Remedies and creator of the Homeowner Referral Network (HRN).

After recognizing a need to help connect quality contractors and consumers, she borrowed $5,000 from her husband’s 403b to start a contractor referral business. After six months, she paid the money back. Three years later, she got a call from a woman in Boston who was interested in starting her own referral network. Sensing the widespread appeal of contract referral businesses as self-employment options, she wrote The Complete Guide to Owning And Operating A Successful Homeowner Referral Network, a business plan that has helped establish more than 400 HRNs nationwide.

The popularity of the HRN model helped propel the company’s revenue to $1 million in 2007—a feat Cohen celebrated with a family trip to Puerto Rico. As her net worth continues to grow, Cohen has incorporated other cost saving measures, like remodeling her home instead of buying a new house, a move she estimates saved her $400,000 over 10 years.

Simon Margolis, 30, San FranciscoHis Approach: Ever since he started investing in 2007, Simon Margolis has viewed downturns in the market as opportunities to buy.

“I haven’t really been concerned with investment performance too much over the past 10 years or so,” he says. Even with the Great Recession hitting just when Margolis was getting into his investment groove, he still opted to offset paper losses with new investments. “I thought of it as an opportunity to buy cheaper stuff than I had the previous week.”

With a net worth of $450,000, the 30-year-old’s strategy is paying off. He makes a point of maxing out his 401k and IRA, favoring low-fee exchange-traded funds. Though initially attracted to S&P 500 index funds, he’s since diversified his portfolio by including international exchange-traded funds, REITs, and commodities, and has taken a larger cash position, all to help hedge some risk.

Based on his current savings rate and investment returns, Margolis predicts he’ll hit the $1 million mark within the next five years. His advice to investors who want to follow in his footsteps?

“Pay yourself first. Make sure you invest before you do anything else. Before you buy a car, before you pay for dinner, pay yourself first.”

Dan Malkin, 27, New York CityHis Approach: “For me, it’s all about saving—and saving properly,” says Dan Malkin. Set to hit seven figures by his 30th birthday, the 27-year-old contributes to his company’s 401k, as well as auto-deposits money from each paycheck into an investment account comprised of exchange-traded funds and two to four individual stocks.

To stay on track, Malkin checks his account balances regularly. “I’m big on comparing expenses one month to another,” he says, doing it with the help of the expense tracking and budgeting app Wallet. The app offers insight into his spending habits, which he tries to manage by walking to work in the summer and cooking his meals at home instead of eating out with friends. Another major savings strategy? Reasonable rent.

“I try to live in a place without insane rent,” he says. “I know people paying 70% of their salary in rent.”

Alison Doyle, 58, Alexandria, Va.Her Approach: Alison Doyle didn’t set out to establish a grand real estate investment plan–it was more of a natural progression. After deciding she wanted to upgrade from a condo to a townhouse in 2004, she recognized the potential of her neighborhood and decided to rent the unit instead of putting it on the market. Four years later, she found herself regularly traveling to her hometown of Buffalo to visit her mother and help plan her high school reunion. With all the back and forth, she decided to purchase a duplex, rent one side and live in the other.

“[Investing in real estate] became more intentional as I learned how well it worked,” says Doyle. “Did I sit down and come up with an investment plan? No, and I probably wouldn’t now. That’s a lot riskier than what I did. I guess I’m more conservative.”

Doyle now manages five rental units: two condos in Arlington, Va., and two duplexes in Buffalo (she keeps one half of one of the duplexes as a vacation home for herself). With all the properties paid off, the recently retired lawyer lives off the rental income and her savings, opting to let her retirement accounts grow unfettered.

Colin Wiesner, 34, Milwaukee, Wisc.His Approach: With the help of his parents, Colin Wiesner graduated from college debt-free. To honor his folks’ commitment to his education, he decided to make the best use of his income—and that meant maxing out his 401k and an IRA straight out of school. His contributions, plus employer match, allowed him to save $25,000 to $30,000 a year.

Retirement saving became such a part of his routine, Wiesner had a hard time scaling back his 401k contributions when he and his wife decided to save for a house. “It was actually kind of difficult for me to do mentally,” he says, “but I understand the need to scale back my saving to attend to my short-term future instead of my long-term goals.” Though he was still maxing out is IRA, he gradually got used to reallocating a portion of his 401k contributions toward a down payment on a home.

Wiesner also tracks his and his wife’s net worth, which is already more than $500,000, with the website Personal Capital. Based on his current savings rate, he anticipates reaching $1 million within 10 years.

“In the back of my mind I’m always concerned [about losing it], but I know I’m in a much better situation than a lot of my peers and my elders,” he says. “I would rather be in the position I am than [that of] people approaching retirement with less than $100,000.”

Sue Carlson, 62, Anna Maria, Fla. Her Approach: In 1984, Sue Carlson took a chance on a $32,500 distressed property Traverse City, Mich. Over the next four years, she committed nights and weekends to updating the home, eventually selling it for $67,000.

“I was able to double my money with that first investment, so I purchased another one, then another one,” she says. “The rest is history.”

Instead of focusing on long-term rentals, Carlson saw the opportunity in short-term vacation rentals in Michigan and Florida. In late 1999, she opened Anna Maria Island Accommodations. In 2005 she sold the company, which had grown to include 75 rental properties on the island. Five years later, she started a second rental property company, Coastal Cottage AMI.

Carlson now owns $2 million in real estate holdings, and, with the exception of a $185,000 mortgage on her home in Anna Maria, her other properties—a second home in Longboat Key, Fla., a rental property in Bradenton, Fla., another rental unit in Anna Maria, and a home in Kewadin, Mich.—are paid off.

Chip Downes, 51, Harleysville, Pa. His Approach: Downes‘s path toward seven figures began when he was 23 years old and started investing in individual blue-chip stocks. Now 51, he has maintained an aggressive strategy, compiling a portfolio that is 95% stocks. Though he still has the individual stocks he originally purchased in his 20s, he now opts for low-fee exchange-traded funds to help diversify his portfolio. While his strategy isn’t right for everyone, especially in his age bracket, he says buying and holding the equities has worked well, even during the financial crisis.

“I’m just willing to take the ups and downs over the years with the expectation that the percent gain will be better than a savings account,” he says.

He anticipates weathering another market downturn before he retires from his position as an information technology consultant. Until then he will continue to funnel any raises into retirement savings while maintaining his current cost of living, a practice that has helped him gradually up his 401k contribution to a healthy 12%.

I’m not the kind of person that can’t sleep. But at the World Series of Poker last week I found myself up both early and late, a nervous energy stealing my natural sense of calm. That’s ok. My adrenaline would sustain me—and this is just one of the things I learned playing in the biggest game of them all.

Much has been written about the life, business, and investing lessons you can learn at a poker table. The game trains you to read body language and spot opportunity; to lose with grace and focus on decisions, not outcomes; to choose battles wisely and be aware of what others see when they look at you.

It’s all true, valuable, and widely applicable. I’ve even suggested that kids take up poker (with age appropriate stakes, of course). It can help youngsters strengthen memory, improve math skills, learn to consider risks, and practice money management. Playing for the first time in the Main Event in Las Vegas, an elimination tournament with more than 6,400 entrants, I discovered still more ways this game teaches success.

Passion is everything Isaac Newton’s mother had to remind him to eat because he was so busy discovering the laws of gravity that he might go days forgetting he was hungry. Newton did pretty well for himself. For me, losing sleep to thoughts of strategy and analysis reinforced that I was doing something I find exhilarating. Sleep is important. The mind must rest. But in the short run the thrill of passion more than compensates. Tournament poker is just a game, and because I enjoy it I am consumed by improvement. But the same principle applies in other endeavors. I apply it in my day job too. When you love what you do, you keep doing it better—an important ingredient of success. So do what you love, not what others expect of you.

Nice guys finish last…or first You meet all kinds of people around a poker table. Some yak incessantly and others remain stone faced for hours; some are unassuming and engaging and others snarl and trash talk. None of it matters. What counts is focus. The two nicest guys at my first table went opposite ways, one to an early exit and the other to the next stage as a chip leader. Heck, I’d have a beer with either of them, and both were solid players. The only real difference was that one paid attention to the table all the time; the other only while in a hand. Guess who advanced? In life, career, or at the poker table, the things you learn while others are taking it easy give you an edge. Smiles and snarls are immaterial if you stay focused.

Down is not out In 1997, a little computer company named Apple was floundering, having lost money for 12 consecutive years. But Steve Jobs returned to the company he had founded, struck gold with the iPod and by 2011 Apple had become the most valuable company in the world. At my table on the second day, the guy that started with the fewest chips kept fighting. He didn’t panic. He kept his wits. Like Jobs, he never gave up. This player, after hours on the brink, finally began to rake some pots and later advanced deep into the tournament. In any pursuit, you may fail or get bested. So you try again. You are only out when you quit.

Your comfort zone should make you uncomfortable People who challenge themselves tend to rise to the occasion, psychologists have found. Children are fearless. They try anything. That’s how they grow. But most adults have tasted enough failure that they tend to avoid difficult situations, which leaves them trapped within personal and professional boundaries. Fear of failure is a powerful obstacle to growth. “There is no learning without some difficulty and fumbling,” John Gardner writes in Self-Renewal. “If you want to keep on learning, you must keep on risking failure—all your life. It’s as simple as that.” At the poker table, you can play safe a long time before your chips run out. But they will run out—unless you get out of your comfort zone and make the occasional bet that scares you half to death.

There is no such thing as house money The economist Richard Thaler pioneered the notion of mental accounting, where individuals treat money gained in different ways with more or less care. You are more likely to spend $20 that you found on the sidewalk than $20 you earned at your job. Why is that? Simple: The money you stumbled into on the sidewalk was found money; you are no worse off when it is gone. Similarly, a gambler on a roll might raise the stakes, reasoning that since he is wagering only money he has won—house money—he can’t really lose. And yet $20 is $20, no matter how you got it. When you spend or lose it, you have less money than before and have missed a chance to improve your financial security. The most impressive player at my table on the second day was a guy with a bunch of chips who remained true to his game. Despite his bountiful resources, he kept methodically building a bigger pile, avoiding the trap of taking unnecessary risks with his “house” money.

Sometimes you have to wing it Most information is imperfect. When you invest in a stock, you know what the company has done in the past. You think you understand how it will do in the future. But you cannot be sure. You gather as much information as possible and buy when you sense opportunity. You might be wrong. Warren Buffett bought shares of ConocoPhillips just before oil prices unexpectedly tanked a few years ago and he lost $1 billion. My tournament ended late on the second day—after 21 hours of card playing—when I bet all my chips at a time when, using the best table information I could gather, I sensed opportunity. It turned out the guy to my left was holding two aces and, alas, I had essentially bought ConocoPhillips ahead of plunging oil prices. That really hurt. But I can live with the Buffett comparison.

When the affluent are nervous, it's time for middle-class investors to make sure their portfolios are on track.

If the wild market swings of the past week have you feeling anxious about your portfolio, you’re not alone. Even wealthy investors say a volatile stock market puts them on edge, perhaps because so much of their money is bound up in stocks.

A new study finds that almost 40% of affluent investors don’t trust themselves to manage their own investments during market downturns—in fact, more than 60% of those surveyed say they currently work with a financial adviser. (Although the study targeted people with more than $250,000 in financial assets, the group surveyed had a median $450,000 parked in the stock market.)

It’s not just wealthy investors who are worried about their finances, of course. Another recent survey found that 62% of Americans overall reported being kept awake by money concerns, though the percentage is smaller than in past years. Among those losing sleep, 40% reported worrying about retirement savings; among those ages 50-54, fully half said this concern keeps them up at night.

No question, the markets have been especially turbulent lately. After a fairly quiet spring, the VIX—a measure of volatility in the S&P 500—jumped at the end of June, as the Greek debt crisis and China’s stock market turmoil made headlines. Plus, a technical glitch shut down the New York Stock Exchange. (The crisis in Greece appears be on track to a resolution, but China’s shaky stock market may yet upend global markets.)

The Surge in Advice

Granted, investment surveys like these tend to play up market anxieties—and the need for professional hand-holding. Wells Fargo, the sponsor of this particular survey, made more than $800 million off its financial advisory business last year.

It’s just one of the proliferating number of financial services firms offering advice to nervous investors. That list includes not only brokers (like Wells Fargo) and fee-only advisers, but also the new breed of low-cost online investment advisory services (often labeled robo-advisers) such as Wealthfront and Betterment.

Established fund groups like Charles Schwab and Vanguard have also gotten into the act by offering a mix of automated advice and human guidance for significantly lower fees—or no fees at all, in the case of Schwab Intelligent Portfolios. Meanwhile, some fee-only advisers have changed their pricing model to create an offering for younger and less affluent investors, which is paid through monthly retainer fees rather than charging a percentage of assets. (Such plans give younger investors access to unbiased advice, but the resulting price tag winds up being well above the traditional 1% of assets.)

Where to Get Help

Should you opt for one of these advice services? The answer may depend on how susceptible you are to fear, greed and other portfolio-undermining emotions. If the answer is “very,” there are simple ways to get some guidance.

The easiest move is to use a low-cost target-date fund, which will give you instant diversification, automatic rebalancing, and an asset mix that grows more conservative as you approach your retirement date.

You can also consider one of the online offerings. You can start small—Wealthfront, for example, just lowered its minimum investment to $500. Above $10,000, you will pay a fee of roughly 0.25% of invested assets.

But if you think you can go it alone, you can save yourself even that modest fee. After all, that Wells Fargo data shows that 61% of those wealthy investors still do trust themselves to stay calm when markets shake. If you know you’ll be able to keep your head while flying solo, pick a simple portfolio allocation, fill it with low-cost index funds and rebalance once a year.

Young investors are being targeted by salespeople pushing a complex annuity with a tempting guarantee.

Memo to Millennials: Don’t be surprised if an adviser or insurance salesperson suggests that your retirement savings strategy include a type of annuity that’s guaranteed not to lose money. My advice if you’re on the receiving end of that pitch: Walk the other way.

It’s hardly news that many young investors are wary of the stock market. So I was hardly taken aback when a recent survey by the Indexed Annuity Leadership Council (IALC) found that more than twice as many investors age 18 to 34 described their retirement investing strategy as conservative as opposed to aggressive. But another stat highlighted in IALC’s press release did grab my attention: namely, 52% of Millennials—more than any other age group—said they were interested in fixed indexed annuities.

Really? Fixed indexed annuities aren’t exactly a mainstream investment. And to the extent you do hear about them, they’re usually associated with older investors looking to preserve capital in or near retirement. So I was surprised that Millennials would be familiar with them at all.

And in fact they’re probably not. You see, the IALC survey didn’t actually mention fixed indexed annuities. Rather, it asked Millennials if they would be interested in an investment that may not have as high returns as the stock market, but would provide guaranteed payments in retirement and guarantee that they would not lose money.

I can’t help but wonder, however, whether those young investors would have been less enthusiastic if they were aware of some of the less appealing aspects of fixed indexed annuities, such as the fact that many levy steep surrender charges, which I’ve seen go as high as 18%, if you withdraw your money soon after investing. They’re also incredibly complicated, starting with the arcane methods they use to calculate returns (daily average, annual point-to-point, monthly point-to-point). And while they allow you to participate in market gains on a tax-deferred basis while protecting you from losses—and offer a minimum guaranteed return, typically 1% to 2% these days—they can seriously limit your upside. Fixed indexed annuities typically impose annual “caps,” “participation rates” or “spreads” that reduce the amount of the market, or benchmark, return you actually receive. So, for example, if your fixed indexed annuity is tied to the S&P 500 index and that index rises 10% or 15% in a given year, you may be credited with a return of, say, 5%.

Don’t take my word for these drawbacks, though. Check out FINRA’s Investor Alert on such annuities, which describes them as “anything but easy to understand” and notes that it’s difficult to compare one to another “because of the variety and complexity of the methods used to credit interest.”

But even if you’re able to wade through such complexities and make an informed choice, should you put your retirement savings into a such a vehicle if you’re in your 20s or 30s? I don’t think so. After all, if you’ve got upwards of 30 or 40 years until you retire, your savings stash has plenty of time to recuperate from any market meltdowns between now and retirement. (Besides, if you’re really anxious about short-term market setbacks, you can easily deal with that anxiety by scaling back the proportion of your savings you keep in stocks vs. bonds.)

Better to create a mix of low-cost stock and bond index funds that jibes with your tolerance for risk and allows you to fully participate in the financial markets’ long-term gains than to opt for an investment that severely limits your upside in return for providing more protection from periodic setbacks than you really need. Or to put it another way, why end up with a stunted nest egg at retirement to insulate yourself from a threat that, viewed over a time horizon of 30 or 40 years, isn’t as ominous as it may seem?

When I talked to Jim Poolman, a former North Dakota insurance commissioner and the executive director of IALC, he did note that Millennials shouldn’t be putting all their retirement savings into fixed indexed annuities. Rather, he says fixed indexed annuities can be “part of a balanced portfolio” that would include traditional investments, such as stock and bond funds in a 401(k). But as much as I like the idea of balance and diversification, I’m not convinced even that is a good strategy. I mean, if you’ve funded your 401(k) and are looking to invest even more for retirement outside your plan, what’s the point of choosing an investment that not only restricts long-term growth potential but that could leave you facing hefty surrender charges (plus a 10% tax penalty if you’re under age 59 1/2), should you need to access those funds?

I’m not anti-annuity. I’ve long believed that certain types of annuities can often play a valuable role for people in or nearing retirement by providing guaranteed lifetime retirement income regardless of what’s going on in the financial markets. But if you’re in your 20s or 30s, you should focus on investing your savings in a way that gives you the best shot at growing your nest egg over the long-term, not obsessing about the market’s ups and downs.